Real Money

ROE v. Paid: Industry Chiefs Rake It In

Industrial companies pay well and for the most part get performance.

Among the 62 industrial companies in the S&P 500, there were some industrial-strength payouts handed to chief executives last year.

The three biggest: David Cote's $56.6 million windfall from Honeywell ( HON), Frederic Poses' $50.4 million bonanza from American Standard ( ASD) and, of course, the mother of all dubious paydays, Dennis Kozlowski's $81.1 million parting gift from Tyco International ( TYC).

As today's "ROE v. Paid: Industrials" chart illustrates, not every executive deserved such largess: Tyco and Honeywell have notched an average return on equity over the past five years below 15% -- below those of many of their peers. American Standard's Poses gets credit for whipping his company into shape. With his $50 million compensation plus the $50 million more he has in unexercised stock options, according to Aon Consulting's eComp database, one wouldn't argue that he is underpaid.

As part of TheStreet.com's coverage of executive pay, the "ROE v. Paid" charts compare a company's average return on equity -- or ROE, a handy measure of how effectively a CEO puts shareholder money to use -- over the past five years with the chief executive's compensation. For compensation, we used the most recent figures provided by eComp Database; the numbers include salary, bonus and options.

Lots of media outlets have been measuring executive pay against the company's stock market returns over the past year. Since the S&P 500 cratered 23.4% in 2002, and took down lots of individual companies with it, we felt ROE would be a fairer -- if still imperfect -- measure of executive performance. (For more on our series, please read this column .)

Some high-profile CEOs are on the industrial list, including GE's ( GE) Jeffrey Immelt and General Dynamics' ( GD) Nicholas Chabraja. Both men are highly paid, but they have ROE figures that easily outpace those of their peers.

All told, half of the 62 companies posted ROE above 15% on average over five years -- the unofficial yardstick for solid performance. Click here to see entire table.

Industrial-Strength BootyAmong the 62 industrial companies in the S&P 500, there were some massive payouts for CEOs in 2002, including $81 million for the infamous Koz at Tyco. Honeywell and American Standard also paid out more than $50 million apiece in pay, bonuses and options to their chiefs. As the ROE chart shows, whether the three earned it is another question. When 2002 compensation figures weren't available, previous-year figures were used, indicated by (2001) in the compensation column.

Company (Ticker Symbol)

5-yr ROE

1-yr ROE

Chief Executive Compensation* Rank in 500 Richest CEOs in 2002

Stock Return in 2002

Deluxe (DLX)

103.9%

299.85%

Lawrence Mosner $4,281,421 Not in Top 500 (2001)

1.3%

Equifax (EFX)

64

76.64

Thomas Chapman $9,498,241 #200-300 (2001)

-4.2

ITT Industries (ITT)

47.7

30.23

Louis Giuliano $6,007,172 #300-400 (2001)

20.2

*Compensation figures were not available from eComp, so Yahoo! figures were used. Source: TheStreet.com, Bloomberg, eComp Online, Yahoo!